The Turning Point: Kodak's Digital Asteroid

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1:58Jona: Thanks for listening to A Long Time in Finance with Jonathan Ford and Neil Collins.

2:08Jona: Welcome to The Turning Point, a new series from A Long Time in Finance. So this week we're talking about Eastman Kodak, the US company that under its dynamic 19th century founder George Eastman was a powerhouse of innovation, inventing the sale of photographic film on rolls back in the 1880s and virtually single-handedly creating the consumer market for photography. This was a company built on R &D, and during his long career, Eastman pivoted Kodak's core activity many times from dry plates to film and from black and white to colour photography, despite hitting profitable lines in the short term.

2:48Jona: And today we're going to talk about how Kodak flunked a similar R &D-led transition long after Eastman's retirement, and how ultimately it pretty much destroyed the company. So in today's Turning Point, we're very pleased to have on the show the man who invented that fatal product, Steve Sasson, to talk about how a brainwave killed a company. So welcome, Steve. Good to have you. Thanks for having me. Pleasure to be here. But before we get on to how you invented that product, the digital camera, I think we should start off by setting the scene and talk a little bit about the history and culture of Kodak and how it was built on research and innovation.

3:27Steve Sasson: Well, you're right, Jonathan. Kodak was very famous for its R &D in the photographic world. In fact, George Eastman, who formed the company, I think, in 1888, I think it was in 1912, he formed one of the first and most effective corporate research laboratories in the world. And they focused on the future of photography, basically. And so they came up with many fundamental inventions which enabled photography to be democratized throughout the world as an everyday consumer experience. The color film, many of the attributes of camera devices throughout the world. And so in addition to novel business models that he came up with, George Eastman I'm referring to now, they've developed many technical innovations which enabled everybody to accept photography as an everyday occurrence.

4:14Steve Sasson: I think his famous expression was to make photography as easy to use as a pencil. And I think he did that. Yeah.

4:20Jona: One of his brilliant ideas was he was a bit like someone like Gillette. He realized that the machinery, the camera, was not necessarily the thing that was going to be most important to the business. It was the films. And even though he invented lots of cameras, I don't know if you've had a box brownie, Neil, in your youth.

4:39Steve Sasson: I fear I did, yes. You did? That dates you perhaps, but okay.

4:48Jona: But the brilliant thing about that, you obviously don't remember when box brownies came out. But the brilliant thing about that, of course, was he was able to make his competitors into his sort of partners in that he was making and developing the films for other camera manufacturers as well, therefore was not dependent on sales of machinery to make the company go successfully.

5:09Steve Sasson: No, that's correct. When he first introduced his camera, which held the exposure capability of 100 pictures, you would buy this for$25 and then you would send it into the company and then you would receive the prints back with a new roll of film loaded into the camera. That was in the 1880s. By the mid 1890s, That$25 camera had gone down to a$5 camera. And I think by 1901, if I remember correctly, the Brownie was selling for$1. So he was really putting forward, put equipment in everybody's hands and I'll make the profits off of the consumables.

5:43Jona: Yeah. Basically, the development, as you say, became rather more expensive than the underlying machinery.

5:49Steve Sasson: Oh, absolutely. Yes. A bit like consumer printers now, where they more as give you the printer and then charge you through the nose for the ink. Yes, exactly.

5:59Jona: But he was also a brilliant marketeer. The name Kodak was invented because it worked in almost every language and was easy to trademark because no one had ever been called Kodak. And he also came up with the marketing slogan, which Kodak, I think, used for many years, which was, you press the button, we do the rest.

6:18Steve Sasson: Yeah, exactly. I mean, he did a lot of novel things and he had an express mission to basically put photography, which up to his point, even when he was a young man, it was a very difficult, you have to be basically a chemist as well as a mechanical engineer to be able to take pictures. He wanted to make it very, very easy to do. And so that's why he invented roll film and a machine to make that. He first started off coating glass plates, of course, but then he went to roll film and then obviously the camera developments that we just spoke about. In addition, he came up with many different business models and marketing.

6:52Steve Sasson: And he also went global with his approach as well. Certainly in England, he was very big.

6:58Jona: Yeah, huge. But the key point, as you touch on, is that he was essentially willing to change his approach if technical developments led him to find something which he thought would be more consumer friendly. So he was very big in dry plates. And he then essentially allowed that business to decline and took the risk on introducing, you know, celluloid, I suppose, film in the 1880s. He was a risk taker and he didn't just take one risk, he took lots.

7:28Steve Sasson: Yes, he did. And he focused a lot of his career on the development of color film, which was a very, very difficult technical problem. And there were several solutions that were offered in the early 1900s, but they didn't meet what he wanted. He wanted something that was easy to use and had reasonably good color fidelity. And of course, he went out and hired a bunch of chemists and scientists from all around the world, actually, to help develop that until in the 1930s, he introduced Kodachrome.

7:57Jona: So let's come to you. You in the 70s, I think in the early 70s, joined Kodak in the famous labs you spoke about that had been built just before the First World War created.

8:06Steve Sasson: Yeah, I graduated from Rensselaer Polytechnic Institute in 1973 with a master's degree in electrical engineering. And traditionally, Kodak had not hired many electrical engineers because fundamentally the company was based on mechanical engineering in terms of cameras and things like that and film production equipment, and then obviously chemistry. So chemists and mechanical engineers, but there were relatively few electrical engineers. But they noticed that more of the unit manufacturing costs of conventional cameras was going into electronics. By this, I mean exposure controls, flash, film advance, things like that.

8:43Steve Sasson: So they started hiring. So I was hired into not the corporate labs, but the Apparatus Division Research Laboratories, which was a separate division of Kodak, it was a very large division, which was responsible for the manufacturing of all the equipment that used the sensitized goods that was manufactured by the Kodak Park, another big division. And so this research laboratory was charted with a very broad charter of investigating all kinds of technologies that would help the development of equipment or solve problems in the implementation of equipment design.

9:13Jona: And tell us about how you came to be asked to crack this unusual problem.

9:18Steve Sasson: The laboratory had a broad cross-section of talents. There were many different groups in there, mathematics, physics, mechanical, optical, and there was an electrical group. And I was in that electrical group. And my supervisor, Gareth Lloyd, came to me one day after I had completed a design of a lens cleaning machine, which had a control system that was built with digital logic. It was the first time I ever did anything with digital logic. And he came to me and said, I've got a filler project for you until something useful comes along. We've got two choices. One is to do some modeling on exposure control systems for XL movie cameras.

9:51Steve Sasson: And the other is to look at a new type of imaging device that had been developed and had just been commercially made available called the charge coupled imager. Now, I immediately jumped at that opportunity because I had done some work as a graduate student around how light affected silicon. So I was very interested in this whole idea of light controlling electrons. kind of thing. And so I jumped at that. The conversation lasted less than a minute. I remember this because he was leaning against my file cabinet and I was sitting in my chair there. And I says, I'll take a look at that. He says, okay, go ahead, go buy one or two of these, because they were kind of expensive.

10:26Steve Sasson: They were several hundred dollars. And see if there's anything useful you can do with it, you know, kind of thing. And that was the extent of the conversation.

10:33Jona: So the little something he's talking about is a thing called a charge couple device?

10:38Steve Sasson: Yes, it's a device actually that's charge coupling mechanism. All it was was a way to move little collections of free electrons that were inside a material, in the case of silicon, and to move these charge packets horizontally along the surface of a piece of silicon. In fact, you could move them with great integrity. You wouldn't lose any electrons as you move them along, right? And so this combined with the idea of using the optical sensitivity of silicon to capture this. And that idea, I think, was come up with by a fellow, I was an Englishman, I think it was Tomset, that came up with this idea.

11:12Steve Sasson: And so this combination of optically gathering or creating a charge pattern that corresponded to a light pattern, the surface of silicon, and then to break that charge pattern up into little buckets and to move those buckets individually out using the charge coupling mechanism. That was developed by Boylan Smith and Bell Labs in the late 1960s. And by the early 70s, a company by Fairchild had come up with an area array that is a two-dimensional array of little what we call pixels now that were little buckets that would collect the charges that were generated by the light falling on the device.

11:46Steve Sasson: And so you could convert a charge pattern into a serial output of charge packets that corresponded to that light pattern. And that's what that device did. And it was 100 by 100. That was the size of it, or 10 ,000 pixels, as we know today.

11:59Jona: Okay. And it's worth, before we come on to you as our technical expert, but it's worth noting that the iPhones today have, what, 1 ,300 times 2 ,800 pixels.

12:09Steve Sasson: Well, I think the latest iPhones have like 48 million pixels or something like that.

12:14Jona: Oh, bloody hell. Okay.

12:16Steve Sasson: So we're talking about a very small number compared to what we have today. Yeah, I remember reading about this revolutionary device in The New Scientist Weekly because I was doing mechanical engineering at Cambridge. It just seemed to me that given the fact that a year or two earlier, you could not have got anything like 100 times 100. I thought, well, in a couple of years' time, it'll be 1 ,000 times 1 ,000. And there's no real limit to how good the definition could get.

12:49Jona: You were slightly going for Moore's Law squared or cubed there for a couple of years. It took a slightly longer.

12:56Steve Sasson: I used that reasoning when I was trying to explain where this might go to codec management in 1976. You cited Moore's Law and I cited Moore's Law, not knowing if Moore's Law really applied to charge coupled device imaging technology, because that was really a stretch. But, you know, when you're desperate, you do things like that. So I did that.

13:14Jona: You invented a camera. I mean, there had been a camera built before for a satellite, I think, but not a handheld device.

13:22Steve Sasson: Yeah, I think what I stumbled upon was I tried to first I said, I've got to capture an image with this because that's what it's kind of supposed to do, a two dimensional charge pattern. And then I said, I've got to store it in order to measure the performance. And then I said, the best way to do is to turn it into numbers. And so I stored it digitally. And then I thought, well, I've really got a electronic version of an optical pattern. I've got a digital image. And then I thought, wouldn't it be great to put it in a portable package? And so I thought I'd build this camera. And I thought this would be great to build a camera with no moving parts.

13:54Steve Sasson: I thought that would be a novel idea. I kind of enjoyed annoying the mechanical engineers with that one. But the fact is, is that when I did that, I said, well, now that I've got this, why don't I build something where I can see the actual pattern? So I had to build a whole nother device, which we call the playback device. So my point in telling you this is that what I offered to Kodak management in 76 was the demonstration of a complete photographic system, crude as it was, that anybody in that room could have picked up that camera and taken the picture and put the tape in the machine, pushed the button, and he could have seen that picture.

14:26Steve Sasson: So it was a portable camera and a playback system that could demonstrate the concept of taking pictures and not consuming any consumables like film or needing paper to make prints on.

14:37Jona: Yeah, I've seen photographs of it. It looks a bit like a toaster. I think it has been likened to a toaster.

14:42Steve Sasson: Yeah, I likened it to a toaster. It weighed about eight and a half pounds. So when I say anybody could have picked it up, they probably physically put it, but were afraid to.

14:49Jona: Yeah, yeah. When you presented your device to your bosses at Kodak, what was their immediate reaction?

14:55Steve Sasson: Well, I must say, I got a broad range of reactions. And I demonstrated it to a broad range of audiences. The demonstration was simple. I'm a 25-year-old engineer at Kodak with no reputation and nobody knew me who I was. and we were inviting managers from all different departments and all different business units to come and see this thing and the demonstration was simple there would be people sitting in a windowless conference room on either side of a conference table i would walk in with my camera folded up carrying it and whoever was sitting in the front on the right i would take a head and shoulder shot of them the picture was captured in 120th of a second and then the tape would start to roll and i that told me i'd captured an image and it was being slowly recorded onto the tape It took 23 seconds for it to record.

15:40Steve Sasson: So the tape was moving. And while it was moving, I would describe to everybody what this thing was, which is a little odd-looking thing. That was to cleverly hide the fact that it took me 23 seconds before I could take another picture. I popped the tape out, and I handed it to the technician who worked with me on this project named Jim Schickler. And he had bought the playback unit with a television set mounted on a little cart in the back of the room. We would plug that in. And about 30 seconds later, up would pop their image. So that was the demonstration. It was fairly simple. And the reaction was very varied.

16:13Steve Sasson: There was a lot of curiosity, technical curiosity, but there was more caution about don't overextend this idea into it because I was basically proposing it was a replacement eventually for consumer photography. Not a very popular opinion to hold at Kodak, as you might imagine. But my concept was, well, we can just make the process easier with this if the quality could ever get better and we could do color and all of the rest. And so depending upon the business unit we were talking to, everything from patent lawyers to business units to the head of the division, they all challenged as to where this might go.

16:50Steve Sasson: You know, when do you think this would become mature? You know, much to your previous point about the image resolution would keep going up. They suspected that to be the case. They questioned me about color. I think the fundamental question was, I expect them to ask me how I did all this because I pulled all these different technologies together into this thing. I'm a technology guy. So I think that's what the world revolves around. And they didn't ask me how, they asked me why. They said, what problem are you trying to solve? In what way are you making this better? Why would anybody want to look at their pictures on a television set when they can look at prints?

17:23Steve Sasson: Prints have been doing it for a hundred years. What's wrong with that? What would an electronic photo album even look like? So I had no idea how to answer these questions because I hadn't really thought about it. I just thought this was a new approach to how to take pictures that didn't require some of the things that it previously had required.

17:40Jona: So they were sort of asking you, the inventor, how to commercialize your own invention.

17:44Steve Sasson: You could obviously see all the drawbacks to it. The resolution was poor. It was only black and white. And obviously, 23 seconds before you could take a second picture. So in its implementation there, it was just a very crude demonstration of all the fundamental elements of what a digital photographic system would be called.

18:03Jona: You said their response was that they said, that's cute. Just don't tell anyone about it.

18:09Steve Sasson: Oh, yeah.

18:11Jona: So was that your impression that they basically just wanted to put it in a box and lock it away and not think about it too much?

18:18Steve Sasson: You know, a lot of people didn't think about this stuff. They did immensely. They spent a lot of money in R &D on this stuff. But at the time, well, first of all, I think it made an impression upon him that a 25-year-old kid with a soldering iron and a voltmeter could build this thing out of parts that he found around the laboratory. Okay, because I had no project plan. I had no budget for this. I stole a lot of the parts. And so that was one thing that sort of, I think, unearthed them a little bit. And the second thing was is that they could see that potentially this could go somewhere. There was no way we were going to say no that we wouldn't get bigger imagers or that digital electronics wouldn't advance.

18:52Steve Sasson: That was clearly happening with microprocessors being developed and things like that. So they didn't know how far this would go, but they were certainly aware that any discussion about this publicly would create some concern, uncertainty around the photographic system that we had today, which obviously we had an established customer base that was quite large. So the only public acknowledgement of this work was in 1978, we were granted a patent on this. After I showed it to a bunch of patent lawyers and they said, why don't you file a patent? They didn't know if we'd do anything with it, but we filed a patent and got it granted.

19:28Steve Sasson: And when the patent was published, I started getting phone calls from different people in the country that sort of thought this was a curious thing for Eastman Kodak Company to be doing. and I called up public relations and public relations said, don't say a word to anybody about what you're doing. If they call you, you tell them to call us and we'll tell them, right? And so I wasn't publicly allowed to talk about anything I just told you about until the year 2001. And by that time, then they were happy that we had done this.

19:57Jona: But with a patent out there, which presumably explains something of how it happens, the words stable door and horse come to mind. If they're basically telling you not to say anything, but anyone can consult the product.

20:10Steve Sasson: Well, I think they were concerned that someone from Kodak would be saying this is going to happen when, first of all, that should be a public relations kind of a thing. So I understood that part of it and I didn't have many answers for people as well. But there was clearly concern on the part of the company that the public perception was that this was closer than it really was because it was decades away from being practical.

20:32Jona: So the way that the story is told is that you invent this thing, Kodak look at their enormously profitable film business, have kittens and tell you not to press ahead at all speed and essentially put it in a box and wait for further developments. Don't frighten the stockholders. Don't frighten the stockholders. And it was a huge company. Was that your recollection? How much further work did they do on it?

20:59Steve Sasson: Oh, no. There was a lot of work starting. There's a fellow, a scientist named Bryce Beyer, who had also patented around the same time the color filter array. That is a way to put color filters on top of a CCD, these pixels, to make it color. You have a buyer, it's called a buyer array, and you probably have it on the phones that you have in your pockets right now. So we were looking at this, but it was very distant, you know, kind of a thing. So it was very much distant in the future. So publicly, I was not allowed to talk about any of my work. But in Kodak, I can tell you, ever since 1975, five, I worked exclusively in digital imaging for the company.

21:34Steve Sasson: We did a lot of work. I had many patents and things like that. And the company spent billions of dollars doing research on all aspects of digital photography, but we knew it was going to take a long time to get mature. And so while you're working on this, we weren't very public about it, but we were internally spending a lot of money, certainly developing megapixel sensors, encoding algorithms, compression algorithms, and all sorts of that, leveraging the technology that was being developed for other fields, like in microprocessors and DRAMs and things like that, but focusing on our eventual application.

22:08Steve Sasson: But we knew what it had to replace, which was photographic film. And photographic film was very good in terms of quality and performance and reliability. And so it was going to take a long time. We weren't terribly happy to see this happening, I will say. At least that was the impression I had. because anytime you found an excuse to break into a new market, they really didn't want to talk about that. And it wasn't quite ready yet. Everything was always really never quite ready kind of a thing. And that went on into the early, I would say the early 90s, and then we started marketing digital cameras and things like that.

22:40Steve Sasson: You said that they kept saying it's not quite ready. The sort of popular belief was that Kodak were asleep and didn't really notice this was going on. But from what you're saying, that's not really quite right. that they were developing it. So what was it that they failed to see? Was it that they thought that it was going to take so much longer than it did? Or did somebody come along with a way to, as it were, short circuit what Kodak were doing and to produce an attractive commercial product much earlier than Kodak had expected? That requires a relatively long answer to your question, because it's a really good one.

23:22Steve Sasson: And it explores not only the technical issues involved in this time period, the consumer behavior changed during this time period, the culture inside of Kodak, what we valued, what we thought the customer valued. And all of that gradually changed as this technology evolved. Technology, we knew that in order to get equal to 35 millimeter film, you need multiple megapixels. Okay. And so you had to build these devices and there wasn't much of an industry incentive. So Kodak started developing to build megapixel sensors. And they built the first one, I think, in the mid-1980s. 86, as I recall, they demonstrated it at a show.

24:02Steve Sasson: And we only demonstrated it at a show because people were losing confidence that Kodak was working on this. Kodak spent billions, tens of billions of dollars in R &D. Most of the intellectual property that went into the fundamental architecture around digital cameras, as we accept them today was invented by Kodak. And that was borne out by a lot of intellectual property values in the early 2000s. We were not asleep. No one was asleep. We were working on this very much, but we didn't want to publicly talk about it because we felt in order to replace film, you have to be every bit as good as film, not only in terms of color and pixel density, but in terms of reliability and cost of implementation and training for someone.

24:39Steve Sasson: And so when we offered, for example, in the late 80s, a DSLR that used one of Kodak's megapixel sensors with image compression very similar to JPEG that you use today. It was a pretty practical camera. And the professional marketing people said, no, we don't want to do this. Why would we sell this? Where's the business model that replaces the one we have? Well, show me the money, basically. And I don't think we ever could do that.

25:04Jona: I mean, there is evidence of, as you say, that Kodak were thinking very hard about this, but could never quite get to the point where they were confident that it was worth pressing the button. So in 1981, Sony introduced the first electronic camera, a thing called the Mavica, which wasn't a digital camera. It recorded its images on a floppy disk, but it was essentially an electric camera. Kodak commissioned a study under a guy called Vince Baraba, who was its head of market intelligence, about the future of photography. And he concluded basically that there was good news and bad news if you relied on film for your business.

25:40Jona: The bad news was the, As you've just said, he said digital photography, electronic photography will eat film in the long run. Chemical film is going to go. But the good news, he thought, was it would take time. So Kodak had another decade at least to prepare. And his interpretation of the debate or the delay was based on a number of factors, which included the cost of digital photography equipment, the quality of the images, as we discussed, but also the interoperability of various components, such as the cameras, displays and printers. You can see from this, you can confect a whole bunch of reasons.

26:14Jona: I mean, in the 80s, that 81, consumer printing wasn't really there. People had those funny old daisy wheel printers, not modern ones that can print in color. So it was a bigger challenge than when you think about it in the round.

26:26Steve Sasson: Yeah, except that he got the premise right that in the end, electronics would eat chemistry. Yes. Yes. And we had this discussion. Believe me, it was inside the company we discussed that. I was one of the guys that evaluated the Mavica approach. And I was very happy to see Mavica do that one because Sony was a major new competitor. And nothing gets your upper management to invest in something when somebody else who's really powerful is interested in it, even though you've been talking to them about five years about this stuff. And the other reason I was excited about it is because the approach that they took would never work.

26:58Steve Sasson: They, like all companies, they do what they know. And they were recording with VCR type technology. It was a system called FM Color Runder for recording it. And so they'd never reached the resolution that would be required. It wasn't going to revolve around the TV set. We kind of knew that. We knew it was going to revolve around the emerging personal computer, which was still emerging very much in the early 80s. We knew that it was going to take a long time and the technology was going to have to mature and we didn't control the technology. Another aspect of Kodak, which was unusual for us. Remember, George Eastman tried to maintain every aspect of the technology associated with his product.

27:33Jona: Well, now I want to leap forward a bit to the 90s when digital photography starts to get to the point where the technology has advanced sufficiently. And I want to ask you about the thing which most mystifies me that Kodak did, which was they kind of adopted a sort of halfway house, which is a technology which they called Advantix. And I remember I had Advantix cameras. I think they had a digital screen, but they still use film inside the camera. And the digital kind of bit of it allowed you to, for example, to order how many prints, which prints he wanted from a film and how many copies he wanted.

28:10Jona: And they spent half a billion dollars developing this system. What was all that about?

28:15Steve Sasson: You're touching a very delicate subject here. No, really. Advantix was in the late 90s. I think it was 96, 97.

28:22Jona: 96.

28:23Steve Sasson: Yeah. Advantix was an attempt by the industry, by the way, not just Kodak. All of the big companies got involved. They all agreed on standards. They had done a lot of customer surveys to see what was missing from the conventional photography experience. And so this idea of ordering prints and digitally and coding it on there was very, very good. But it goes back to the old expression. I'm not sure who said it, but the customer really doesn't know what they want until they see it. And so they basically were saying that we're just going to make the world as it is a little bit better. And we're going to use digital because now by now associating digital with your project was a good thing.

28:59Steve Sasson: Right. So they put this in place. I will tell you that a number of us in the company, when we saw Advantix, I distanced myself from that project as far as I could. I wasn't the only one. I think a lot of us saw that as this was the established element in the company trying to preserve a very profitable business model. Hard to argue with guys that could make the margins that they did on photographic film. We didn't have a substitute for that. So in that sense, they were right, I guess. But we saw that eventually this is just not going to work because digital photography by 96, I think by 97 and 98, there was over a million digital cameras sold.

29:36Steve Sasson: This was really growing now. And so it seemed like a bit of a desperate attempt on our part to do that or the industry part to do that. But they did it and they spent a lot of money on it. And I don't know if they call it a success or not. success might be measured in how many years can you sustain such a great, profitable business model before it goes away?

29:57Jona: So the other conventional story is that the people who won from this transition were really not the camera makers and the filmmakers who obviously had a foot in a very profitable traditional business stream, but the computer makers who basically came at this where they said, well, this is something we could get into with our technology. and we don't have any problem with eating the film business because we're not in it. Do you think that's fair? And do you think any of the existing camera makers did it better, film companies did it better than Kodak?

30:28Steve Sasson: Well, yeah, certainly I would say Kodak sort of had a three-pronged strategy. One was pharmaceuticals, one was copiers, and one was conventional photography. The pharmaceuticals required an enormous investment. I think it was in 88 that they did Sterling. And I think that restricted Kodak's ability because they did a lot of debt financing. And that restricted our ability to deal with the uncertainty in the other two elements. Right. And I think they ended up selling the copier business at some point in the 90s. They basically focused on photography, but they really didn't have much flexibility at that time.

31:04Steve Sasson: Right. So Kodak introduced excellent DSLR cameras in the early 90s. Jim and Garvey, we've had a wonderful team on that. And we made great technological strides, invented fundamental architectures, made great imagers, adopted established companies' camera bodies like Nikon and Canon. But in the end, we didn't make much money off of it. The problem you have when you're working in a company like Kodak is you always have part of the house making a ton of money. Film was very, very profitable, as you can imagine. And so everything's sort of compared to that. So if you want to go into a new business and you're not making a ton of money after a few years, people start to lose interest or don't want to invest in it anymore or get a lot of negative press from the financial press, for example.

31:49Steve Sasson: Why are you wasting shareholder dollars on this? It's not coming back. So I think that's where Kodak had some real headwinds. Other companies, as you ask, like Fuji, for example, I think repurposed a lot of their work a lot more effectively than Kodak did. They still have a camera presence, but they focus more on materials management. And Kodak, by the way, is not gone. Kodak is quite successful now in terms of materials and printing, and certainly large, high-speed inkjet printing and a lot of material science. So they've reverted back to their materials heritage.

32:20Jona: Yeah, I looked and saw that last year they reintroduced their 35mm film. Kodak Color film is now back on the shelves, at least some shelves. I don't know where.

32:30Steve Sasson: Yeah, it's surprising. I think a lot of young filmmakers sort of like the film look. I can't explain it. I think it's partly artistic and partly nostalgic. I don't know how big a market it is, but they did do that. You're right. There was quite a lot of buyers for conventional still cameras. Yeah. Which my daughter is one. There's something different about you've got to frame the picture because you only have one shot rather than just point and shoot with your digital camera and get 200 shots. It sort of seems to concentrate their minds a bit. And some of the results are really quite striking.

33:06Steve Sasson: Yeah, I noticed that. You know, when I did a lot of interviews in the last couple of years, and one of the interviews was with a New York City photographer, Harvey Wang, and he did a book on this. He pointed out that part of the magic of photography is that you can go in a dark room after you've spent your time carefully considering what shot to take, and you can hold in your hand a physical manifestation of your work. Your image is there. You know, there's no thing on a computer in the cloud where formats can change and all this. It's right there. There's a very human touch to it kind of thing.

33:39Steve Sasson: Perhaps that's what your daughter is resonating with as she develops her pictures. Does she have a dark room in her home? Is that what she does? No, no, no. She sends them away and back they come with a new film. You know, it really is wrestling.

33:52Jona: That's like the old days.

33:54Steve Sasson: Yeah, what's good comes around, I guess. Yes, I know. I know.

33:57Jona: Let's just finish up because I think I just looked at that graph of film sales. I mean, digital cameras overtake sales of conventional cameras in 2002, 2003. And the peak of film sales in the world is hit in 2001. And between 2002 and 2006, conventional film sales fall by 60%. It's just an incredible collapse. And that's before I think the thing that kills it off as a mass market product completely is the smartphone.

34:27Steve Sasson: Yeah. The smartphone encompassed not only the capture, but also the printing aspect of it. You could view it and send it and share it without printing, right? So there's a lot of different elements to the photographic chain. But when they all get encompassed in one device, there's a massive disruption to your whole business model. And so you're right. Right. 2007, I think, was the iPhone was first introduced.

34:50Jona: 2007, exactly right. Now, it's very hard to imagine anyone at Kodak back in the 1980s sitting there thinking, we have to get into the phone business to keep our business model alive. If you'd come up with that one, Steve, I think they would have given you an even dustier response than the one they did.

35:06Steve Sasson: Well, you know, I was in London at the Economist Award. They were very kind to give me an award. I met Mr. Cooper there, the vendor of the cell phone. And we were speaking in the back of the hall there. And we were trying to figure out which was the worst company to work for at the time because they were both unaccepting of new ideas. But neither one of us ever thought about combining these things. It's an evolution that I don't think anybody anticipated. Okay, but it turned out to be exactly what the public eventually would adopt. Well, I wonder whether there's anything in the suggestion that really Kodak actually could not have stopped this revolution.

35:46Steve Sasson: And as Jonathan just said, the huge investment required to go into becoming a telephone business would be beyond a business like Kodak. They are held up as a sort of dinosaur that didn't see the way the world was evolving. But it actually might be fair to say that actually they were doomed because there was no way they could possibly have ended up with anything like the iPhone. I agree. I think that's a really bad characterization of being called a dinosaur. They were inventing and developing many of the things that we take for granted today in terms of the architecture. We just couldn't see how to make money at it.

36:30Steve Sasson: Dinosaurs were very successful, of course. Well, until the big asteroid came, I guess, which I hope I'm not characterized that way. You're right. Kodak made some pivotal decisions in the late 80s, like acquiring Sterling, for example, which was a big financial bet.

36:52Jona: That's a pharmaceutical company, right?

36:54Steve Sasson: Yeah, that's a pharmaceutical company. And I believe it was like$5 billion, largely financed by debt. If I remember, I wasn't too close to it at the time. And I just said, boy, if they had done that in an electronics direction as opposed to a pharmaceutical direction, perhaps there would have been a chance for us to do something. Now, I would say there would have been cultural issues with respect to digital imaging still overtaking the profitable film business, even if you had a big electronics arm that was very powerful in that regard. But it certainly would have been more interesting than kind of where we ended up with that.

37:25Steve Sasson: So there were some decisions that were made during that time. And Kodak, the issue culturally was Kodak could control a lot of what was introduced in the photographic world in the first part of the century. People looked at Kodak to introduce new films, new cameras, new capabilities and cameras. And so when Kodak said something, people believed it and said, yeah, we're going to go with this. So in a sense, we had this sort of built into our feeling that, yeah, we could control this industry. But it became apparent in the 1980s that that was no longer going to be the case. And so we were working very hard at it, but I think we were struggling with coming up with a profitable model, basically, that could come close to film, which is why I think they went to pharmaceuticals, another famously profitable business.

38:07Jona: Well, I think one way of looking at it is that Kodak, your invention, whether or not Kodak itself was able to exploit it commercially has had a huge commercial impact on the world and has changed the fortunes of lots of other companies. and say it's advanced consumer welfare. It's just that Kodak, sadly for them, couldn't take advantage of the change they helped to bring about.

38:31Steve Sasson: When I was making the presentations in 76, they kept asking me, when do I think this will be viable for consumers? And of course, I had no idea. But I used Morse Law, as we referred to previously. I called the research labs and I said, when would we have something photographic quality? They said a million pixels, if you wanted color. That was the guess at the time. and I had 10 ,000. I had Moore's Law. I did a little calculation, not knowing if Moore's Law applied to CCD technology. And I said between 15 and 20 years. And we launched our first consumer camera 18 years later. And I was completely lucky on that estimate.

39:07Steve Sasson: I mean, just a complete guess. I was just desperate for some data to use to make a projection. But we had decades to react to it. And we did work at it very hard. But I don't think we could come up with a business model that could come close to George Eastman's original business model of selling film, which had obviously a very high barrier to entry. Very few companies could successfully manufacture this stuff. I think that's kind of where we fell down.

39:32Jona: Well, the business model of photography, apart from very, very sort of high-end specialist stuff, in one of these smartphones, it's a kind of ancillary service. So we don't really pay for it exclusively anymore at all. So in that sense, it's really hard to conceive of how you could indeed. have worked a commercial model together.

39:51Steve Sasson: It wasn't just your technology, but it was the industry itself, which was going to be eaten. Yes. Everything was being disrupted. We used to think that everybody wanted high image quality. We thought, you know, memorialize events, good image quality. Then we realized people really didn't care that much about image quality. Once you got to a certain level, they value immediacy. If I can share this immediately and easily, that's more important than having a great image, the perfect image. People's customer expectations of the photographic experience also changed in addition to the industry and the technology.

40:24Steve Sasson: That's quick. That's good enough. That's good enough. Exactly.

40:27Jona: I think we've got to the bottom of this to some extent. I think we've proved that Kodak wasn't a dinosaur. They be with a way in trying to solve the problem, but ultimately the problem was probably too big for anyone to have solved in that industry.

40:38Steve Sasson: Likely, yes.

40:39Jona: And remained of the same size that they were back in the 80s when you were working. Oh, absolutely. Fascinating and really interesting discussion. And thanks very much for joining us to talk about this particular turning point in the life of a company.

40:55Steve Sasson: That was A Long Time in Finance with Jonathan Ford and Neil Collins. Production and editing by Nick Hilton. If you enjoyed the show, please rate and review it on your podcast app as that will help new listeners find us.

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